Gravity, the Korean online game company, has hit back at a shareholders’ attack on related-party transactions, accusing disgruntled minorities of disrupting management’s strategy for their own short-term gains.

The Korean gamemaker accused Moon Capital Management LP and Ramius Capital Group LLC, the US hedge funds that launched the proxy battle to oust two directors, of filing “frivolous lawsuits” and harassing shareholders.

Minority shareholders last month launched a proxy battle claiming Gravity has been run for the benefit of its majority shareholder and its related parties, which include Softbank, the Japanese telecommunications and internet group founded by Masayoshi Son. Nasdaq-listed Gravity is 52.4 per cent held by a vehicle linked
to Taizo Son, brother of Masayoshi.

Among deals that have proved vexatious is Gravity’s decision to award the Japanese licence for Ragnarok, its popular online game, to GungHo Online Entertainment, which is 44.6 per cent held by Softbank. Softbank declined comment.

Gravity said the hedge funds had “resorted to their time tested strategy of causing disruption in order to extract short-term gains for themselves”.

It added shareholders had failed to advance alternative strategic steps. “Instead, they have filed frivolous lawsuits in Korea and embarked on fishing expeditions searching through the company’s books and records.”

But Gravity’s counter-proxy stopped short of addressing issues raised by Moon and Ramius. Gravity refused further comment.

While Gravity’s proxy insists the transaction which hands the Japanese Ragnarok licence to GungHo Online was the result of an “open and transparent bidding process” it gave no
further details or size of competing bids. Nor did it expand on plans to extract value from content and broaden distribution.

Battle will be joined on December 26, when shareholders will have an opportunity to vote on the hedge funds’ proposals to oust Il Young Ryu, chairman and chief executive officer of Gravity, and Seung Taik Baik, senior executive vice president and chief operating officer.

The Gravity Committee for fair Treatment of Minority Shareholders, formed by the two hedge funds, rejected Gravity’s claims it harassed other shareholders.

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